Misplaced expectations make for marketing missteps: is health care like other U.S. businesses that seem to be long on marketing expectations and short on patience for marketing results? A new report suggests that it could be true

Healthcare Financial Management, Jan, 2005 by Arthur C. Sturm, Jr.

In 2004, the Society for Healthcare Strategy and Market Development of the American Hospital Association published Impact Marketing: Optimizing Value and Return on Investment, by The Strategy Group, which included the results of a highly relevant study on marketing effectiveness. The report documents a clear point of difference--make that a chasm--between what chief executives want and what most hospital marketers are delivering. Accepting the guidance from the report could help many organizations avoid such marketing missteps as inappropriate funding against the goals, unreasonable expectations, and goals that are out of the purview of marketing.

Misplaced Expectations

The encouraging news is that 60 percent of CEOs questioned in the survey said it is "very important" to measure marketing success. (It does cause one to wonder about the 40 percent who don't think that way, doesn't it?) In fact. 87 percent of the surveyed CEOs responded that the importance of marketing had increased: none reported that it had declined. However, only 19 percent said they are satisfied with the tools to measure that progress.

As part of its analysis, The Strategy Croup asked CEOs to identify the metrics of marketing success. Shift in market share was ranked at the top by 77 percent of the respondents. In any industry, that's reasonable, assuming that marketing has the authority to influence the elements that control shifts in share--namely price, distribution. and product offerings.

On second thought, maybe that's not so reason able after all. Most healthcare marketers aren't allowed near any of those elements.

Curiously, the CEOs surveyed ranked utilization (66 percent) and patient satisfaction (62 percent) as second and third. In my 25 years in health care, I have yet to see a hospital marketer have even the remotest influence on utilization. And I've seen only one example of an organization that measures how marketing influences patient satisfaction--the Mayo Clinic, whose impressive approach to satisfaction management is worthy of a column on its own.

Toward the middle of the rankings, awareness and preference appeared (53 percent). It's hard to argue that these metrics are unimportant, but it is becoming increasingly difficult to use them as a significant measure of achievement. And at the absolute bottom of the rankings were those that intrinsically drive other industries cost per lead, cost per new patient, and cost for 1 percent of market share--at a limp 9 percent choice among respondents.

(Im)Patience?

Misplaced expectations are not ,just about deliverables: they are also about timelines. Healthcare marketing appears to be upside down here as well.

In the same study, CEOs were asked when they expected to see results from marketing efforts. The data suggest the respondents see health care as retailers do:

* Less than 90 days (17 percent)

* 4 to 12 months (53 percent)

* 12 months or more (19 percent)

Remember, the expectation is to shift market share, increase utilization, and improve patient satisfaction. Certainly 12 months is reasonable, but the span of 4 to 12 months makes one question the reasonableness of these expectations.

What's Reasonable?

Unless executives and marketers find a common ground, the industry will likely lose marketing as a strategic resource at a time when it is needed most. In general, hospitals should think about:

* The value of a customer over time (years) versus the revenue resulting from a single transaction (marketing promotion)

* The cost of customer acquisition and retention versus the cost of marketing campaigns

* Accountability for results achieved versus the selection of marketing tactics

* Quantified, clearly defined expectations prior to launch of an effort rather than a hindsight ("that wasn't the number I had in mind") evaluation

Different industries measure marketing success in a variety of ways. Nevertheless, the following appear with great frequency in the literature and in the boardroom:

* An increase in revenue by 10 percent or more

* An increase in volume among profitable product lines by (you pick the percentage)

* A level of customer retention of 50 percent to 60 percent or more

* A level of customer acquisition of 10 percent to 15 percent or more

* Customer acquisition/retention at a cost of less than 10 percent of net revenue of total gain

It is important to make the goals meaningful. Tepid goals of single-digit growth usually produce equally tepid results.

Retention: Overlooked Opportunity

For some reason, many healthcare executives believe that growth is a function of patient acquisition almost exclusively. Compare that with a study reported in the March 2004 issue of Peppers & Rogers Group's 1to1 Magazine that stated 60 percent of CEOs from other industries expect their revenue growth to come from existing customers. Your hospital's plan (and corresponding expectations) should address retention strategies. Many healthcare markets, regardless of size or location, have limited options for growth through acquisition, but they continue to strategize as if acquisition were their key to growth.